Correlation Between CarMax and Macys

Can any of the company-specific risk be diversified away by investing in both CarMax and Macys at the same time? Although using a correlation coefficient on its own may not help to predict future stock returns, this module helps to understand the diversifiable risk of combining CarMax and Macys into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between CarMax Inc and Macys Inc, you can compare the effects of market volatilities on CarMax and Macys and check how they will diversify away market risk if combined in the same portfolio for a given time horizon. You can also utilize pair trading strategies of matching a long position in CarMax with a short position of Macys. Check out your portfolio center. Please also check ongoing floating volatility patterns of CarMax and Macys.

Diversification Opportunities for CarMax and Macys

0.69

Correlation Coefficient

CarMax  Macys

Poor diversification

The 3 months correlation between CarMax and Macys is 0.69. Overlapping area represents the amount of risk that can be diversified away by holding CarMax Inc and Macys Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Macys Inc and CarMax is a relative statistical measure of the degree to which these equity instruments tend to move together. The correlation coefficient measures the extent to which returns on CarMax Inc are associated (or correlated) with Macys. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Macys Inc has no effect on the direction of CarMax i.e., CarMax and Macys go up and down completely randomly.

Pair Corralation between CarMax and Macys

Considering the 90-day investment horizon CarMax Inc is expected to under-perform the Macys. But the stock apears to be less risky and, when comparing its historical volatility, CarMax Inc is 1.74 times less risky than Macys. The stock trades about -0.17 of its potential returns per unit of risk. The Macys Inc is currently generating about -0.03 of returns per unit of risk over similar time horizon. If you would invest  1,640  in Macys Inc on October 12, 2024 and sell it today you would lose (37.00) from holding Macys Inc or give up 2.26% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	100.0%
Values	Daily Returns

CarMax Inc  vs.  Macys Inc

CarMax Inc

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in CarMax Inc are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. In spite of fairly unfluctuating primary indicators, CarMax showed solid returns over the last few months and may actually be approaching a breakup point.

Macys Inc

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Macys Inc are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of very unfluctuating primary indicators, Macys may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Pair Trading with CarMax and Macys

The main advantage of trading using opposite CarMax and Macys positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if CarMax position performs unexpectedly, Macys can make up some of the losses. Pair trading also minimizes risk from directional movements in the market. For example, if an entire industry or sector drops because of unexpected headlines, the short position in Macys will offset losses from the drop in Macys' long position.

The idea behind CarMax Inc and Macys Inc pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.

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Note that this page's information should be used as a complementary analysis to find the right mix of equity instruments to add to your existing portfolios or create a brand new portfolio. You can also try the Equity Analysis module to research over 250,000 global equities including funds, stocks and ETFs to find investment opportunities.